Member Article

National Grid agrees £13.8bn consortium sale for 61% of distribution business

British multinational electricity and gas utility company National Grid plc has sold 61% of its gas distribution business to a consortium of infrastructure investors, for an enterprise value of around £13.8bn.

The Warwick-headquartered firm, whose principal activities are in the United Kingdom and Northeastern United States, will receive a payment of £3.6 billion in cash from the consortium (subject to certain completion adjustments) and will own a 39% minority equity interest in a new holding company.

The consortium comprises Macquarie Infrastructure and Real Assets (MIRA), Allianz Capital Partners, Hermes Investment Management, CIC Capital Corporation, Qatar Investment Authority, Dalmore Capital and Amber Infrastructure Limited/International Public Partnerships.

Following completion of the transaction, National Grid intends to return £4bn of net proceeds to shareholders through the combination of a special dividend (together with a share consolidation) and share buy-backs.

At least 75% of the net proceeds are expected to be returned via a special dividend in Q2 of calendar year 2017.

Completion is conditional on the receipt of merger clearance from the European Commission. Subject to satisfaction of this condition, National Grid expects that the Transaction will complete on or prior to 31 March 2017.

John Pettigrew, Chief Executive of National Grid, revealed: “Today’s announcement follows a highly competitive sale process. It represents an important milestone in the evolution of National Grid and is a good outcome for our customers, employees, and shareholders.

“The Consortium, has a long-term commitment to the UK with significant experience in owning infrastructure assets, and we look forward to working with them as the gas distribution business continues to deliver a safe and reliable service.

“On completion, National Grid’s portfolio will be rebalanced towards higher growth assets, whilst maintaining a strong balance sheet and supporting our sustainable dividend policy.”

Martin Stanley, Global Head of MIRA, on behalf of the consortium, said: “This is a well-established business and we are confident that as investors we can continue to provide both high quality infrastructure for the UK and appropriate risk-adjusted returns for investors.

“MIRA has long standing operational experience in managing utilities and critical infrastructure in the UK, across Europe and around the world and we are committed to being a long term investor in and a responsible custodian of National Grid Gas Distribution.”